Co-Executors Of New Jersey Estate Must Act In Concert; Unilateral Action By Co-Executor May Constitute Grounds For Removal

A New Jersey court has held that a co-executor’s “unbridled belief she could act unilaterally in administering the decedent’s estate without the need for consent from the co-executrix … [may] amount[] to a breach of the [co-executor’s] … fiduciary duty [and] … [constitute] cause for her removal.” In the Matter of the Estate of Albert Sauer, Deceased, (N.J. Super. Ct., Ch. Div., Bergen County, Docket No. BER-P-088-11, May 19, 2011).

Albert Sauer died in January 2010. His Last Will and Testament left his entire estate to his three adult children and appointed his two daughter, Maria and Lynne, as co-executors of his estate. Thereafter, the decedent’s will was probated and both daughters hired attorneys to assist them with estate administration.

Lynne, who had been the decedent’s agent under a durable power of attorney during his life and assisted him with his financial affairs prior to his death, had access to all of the decedent’s assets. She began to administer the decedent’s estate even before the decedent’s will was probated and continued thereafter without notification to or approval from her sister, the co-executor. Among other actions, Lynne paid the decedent’s bills with estate assets, refused to provided information about the decedent’s finances or medical history to the co-executor, opened and closing accounts and sold shares of stock without the co-executor’s knowledge or consent, distributed personal items to herself and placed into storage personal items to be distributed to the other beneficiaries, and failed to provide an accounting she had been ordered to provide by the court. She also refused to pay Maria’s attorney from estate assets, although she paid her own attorney out of estate funds.

As a result of Lynne’s unilateral acts, Maria filed a Complaint alleging, among other claims, that Lynne was acting as the sole executor of the estate to the exclusion of the co-executor, that she breached her fiduciary duty to the beneficiaries, and dissipated and inappropriately used the estate’s assets without Maria’s consent. Lynne filed an Answer denying the claims asserted against her.

After a hearing, the trial court ruled that removal of an executor, while an extraordinary remedy to be exercised sparingly and cautiously, is one that falls within the court’s discretion. The court held that, in this case, even though it did not appear that Lynne misappropriated estate assets or utilized estate funds in a way which was harmful to the estate, Lynne’s belief that her involvement with her father’s finances justified her actions in excluding the other co-executor conflicted with state law which generally requires mutuality of action between the co-fiduciaries:

As the court in In re Greim’s Will made clear, “[i]t is, of course, elementary that co-executors are regarded in the law as an individual fiduciary in the administration of the estate entrusted to them.” 140 N.J. Eq. 183, 186 (Prerog. Ct. 1947) (citing Shreve v. Joyce, 36 N.J.L. 44, 48 (1872)). Accordingly, absent circumstances requiring an executor to bring an action against the other executor, the executors are required to act in concert. Id. at 187. Moreover, executors have a “duty to participate in the administration of the estate and each had the duty to use reasonable care to prevent the others from committing a breach of trust.” In re Koretsky, supra, 8 N.J. at 524 (citing 2 Scott on Trusts, § 184, p. 972).

Although he ultimately decided not to remove Lynne as executor, the trial judge directed that “[n]o checks shall be issued on behalf of the estate unless jointly signed by both executrixes, or agreed upon by counsel, in writing.” With regard to Lynne’s refusal to pay Maria’s attorneys fees, the court ruled that “either both executrixes are entitled to receive compensation for their attorney’s services, or neither are.” As a result, the court directed the attorneys to reach an agreement about the payment of fees and that, in the absent of an agreement, “the court will direct both [attorneys] … to disgorge the fees paid to date concerning the decedent’s estate … and return the same to the estate account.”

The case is annexed here – In the Matter of the Estate of Albert Sauer, Deceased